Business Context and Reporting Period
Company: Eastman Kodak Company
Filing Type: Form 8-K (Current Report)
Date of Report: April 26, 2011
Event: Entry into a Material Definitive Agreement and Creation of a Direct Financial Obligation.
Key Financial Metrics and Facility Details
This filing details the terms of a new credit facility rather than reporting operational financial results (revenue, profit, or cash flow) for a specific period.
- Facility Type: Asset-based revolving credit facility.
- Total Capacity: Up to $400 million.
- Letters of Credit: Up to $250 million available; $99 million previously issued and continuing under the new agreement.
- Outstanding Advances: None at the time of filing.
- Excess Availability: Currently higher than $100 million.
- Interest Rate: Applicable margins over Base Rate or Eurodollar Rate.
- Unused Commitment Fee: Quarterly fee ranging from 0.375% to 0.50% annually.
- Collateral: Liens on substantially all non-real estate assets and a pledge of 65% of the stock of certain material non-U.S. subsidiaries.
Material Changes Versus Prior Period
The Company amended and extended its previous secured revolving credit agreement (originally entered into March 31, 2009). Key changes include:
- Extension: The facility term is extended to five years from the effective date (April 26, 2011).
- Termination Trigger: The facility will terminate 90 days prior to the maturity of the Company's 7.25% Senior Notes due 2013 if those notes have not been redeemed or satisfied.
- Covenant Thresholds: A "Trigger" is established where excess availability falls below the greater of $40 million or 12.5% of the aggregate facility, requiring a fixed charge coverage ratio of not less than 1.1 to 1.0.
- Cash Sweep: A concentration account will be established to sweep cash to pay down lender amounts if the Company is in default or excess availability falls below the greater of $50 million and 15% of the aggregate facility.
Guidance, Outlook, Risks, and Unusual Items
Management Commentary: The facility is intended for general corporate purposes. Borrowing to prepay or purchase the 7.25% Senior Notes due 2013 is permitted only if excess availability is at least 20% of the total facility.
Risks and Contingencies:
- Covenants: Negative covenants limit the ability to incur additional debt, create liens, make investments, or distribute to shareholders.
- Events of Default: Include payment defaults, breach of covenants, bankruptcy, ERISA/pension plan events, cross-defaults on indebtedness over $50 million, and change of control.
- Consequences of Default: Lenders may stop advances, impose default interest rates, declare all amounts due immediately, and require cash collateralization for letters of credit.
Important Facts for Investor Verification
- Verify the current status of the 7.25% Senior Notes due 2013, as the credit facility's termination is linked to their maturity.
- Monitor the "excess availability" metric to ensure it remains above the $40 million/12.5% trigger to avoid restrictive fixed charge coverage ratios.
- Confirm the utilization of the $99 million in outstanding letters of credit and the remaining $151 million capacity for new letters of credit.
- Review the specific definitions of "eligible accounts receivable and inventory" to understand the borrowing base calculation.